You can’t live without a car? Neither could I. Or so I thought until I decided last year to sell my car to help me achieve my goals faster. And I’m not alone. The number of passenger vehicles in the U.S. per capita has fallen by nearly 1 million every year over the past decade.
It cost an average of $7,000 per year to own a car so it’s no wonder so many people are dropping the four-wheeled ball and chain. Let’s look at the worst offenders of car ownership to your capital:
- Car payments may be worse than burning your money. One third of Americans spend $475 every month on a car payment. Cars are not investments, they are depreciating assets. By the time the average car is paid off it will have lost 70%, and the remaining value will have been eaten up by the interest and maintenance. If you’re lucky, you will only lose the full value of the car.
- Gasoline prices will continue climbing. The average American spends $2,000 per year on gasoline. That’s $166 every month. And with the expectation that oil prices will double over the next 10 years, that number will only grow, even if cars continue to improve fuel economy.
- Insurance is overpriced. The average family will spend more than $84,000 on car insurance in their lifetime. The only way out is to not pay it—by not owning a car.
- Every car is a time machine. Unless it’s a collectible, even most used cars will lose 15% every year. So every car is a time machine: back to when you were broke; or, if you make the mistake of taking a loan, into the future when you’ll be broke.
Owning a car is not a necessity, it is a luxury. The convenience it provides is a luxury. The distance from where you work it allows is a luxury. You may not want to trade car ownership for savings, but you can.
Here are four reasons to get rid of your car:
- Living close to work saves time and money. Conserving time and money is key to building wealth and having a more fulfilling life. Burning gas in traffic is not going help. I will someday be able to bring work to me, but for now I go to it.
- Using public transit is usually cheaper than driving. Yes, I hate it too. Especially here in Portland, Oregon where it seems half of the passengers are homeless, drug addicts, or welfare zombies. But there is no question it is more cost-effective than commuting by car. In most cities, monthly passes for two are cheaper than gas cost alone. Every time I ride, I just remind myself I’m one step closer to independence.
- Walking or riding a bike is the healthiest way to travel. Double your gain and improve your mental and physical health while paying nothing for transportation. Walking and biking also give you valuable time to unplug from the routine and regain focus on your goals.
- Increasing effort to travel will lower impulsive spending. Impulsiveness masks the real cost of decisions with the high of immediate satisfaction. A natural consequence of not having a car is not being able to satisfy as quickly. I find that when I want something, by the time I plan a route, gear up, get the bike out or hop a bus, and finally get there, the high is gone and I can think more clearly about whether I really need (read: want) it.
I sold my car and drastically reduced my spending last year. This year I accomplished my first major financial goal: getting out of debt. Now I’m working on the second one: saving up a chunk of investment capital. I’m not sure when I’ll return to car ownership, but for now I’m happy speeding closer to my goals.
If you got rid of your car, what goal would you put that money towards?
Update: Since this post, we bought a car. But the ideas here are still relevant, whether or not you end up ditching the wheels.